A flag has gone up warning of a shift to a more protectionist world; did you spot it?
US President Donald Trump recently imposed a tariff on imported solar energy components, primarily from China – the world’s biggest producer. Given his ongoing climate change denialist tub-thumping, Trump’s antagonism towards solar energy is not surprising, but the imposing of tariffs is a flag that something bigger is at play: increased protectionism, with the mantra ‘America First!’ at the helm.
So what is ‘protectionism’? In this respect it is the theory or practice of taxing imports with the intention of shielding a country’s domestic industries from foreign competition. It sounds like good business sense for a country, but it’s not really. Globalisation and a growing global economy relies on competition and the unhindered exchange of goods and services across borders. Imposing tariffs on those goods and services just gets everyone’s backs up, and risks a tit-for-tat reaction. In effect, Trump has fired the first shot, and China is the target.
Why did he do it, why now, and what will probably happen? Firstly, protectionism is often a political ploy to garner popular support, and Trump has made no secret of his desire to appeal to the American coal industry. Secondly, the timing is interesting – the NAFTA (North American Free Trade Association) negotiations between the US, Canada and Mexico, are about to go into the third round, and this decision will send a strong message to the other two parties. NAFTA is the world’s biggest free trade agreement; its final design will have global implications.
Thirdly – with respect to what could happen – there are a few scenarios that could play out, largely determined by China’s response. One sees China fire back, prompting a trade war between China and the US, with potentially devastating consequences to the global economy. Another sees China act restrained and responsible, while the world watches Trump behave like a spoiled child; with the US taking most of the brunt. A third is that Trump’s actions deal a blow to the renewable energy industry, and the momentum heralds a resurgence in the fortunes for coal.
Whichever scenario plays out, it will mark the play of an interesting game in global trade, environmental issues, and political power; so keep an eye on developments.
[This article originally appeared on the mindofafox Growing Foxes app in the week of 29 january 2018. Growing Foxes is a school strategic intelligence programme designed by mindofafox. It is being piloted in a number of leading schools in the UK and South Africa. The app serves to support those students currently engaging with the programme. Click on the logo to find out more].
Image: RJ Matson, Roll Call